Software stocks fall as ebbing geopolitical risks prompt renewed focus on long-term disruption
In fact, it’s never been more likely that if semis are outperforming the S&P 500, software is lagging.
With investors now less worried about what a war and spike in oil prices will do to the global economy, they’ve returned to worrying about what AI tools will do to software stocks.
The iShares Expanded Tech Software ETF is getting dumped hard again on Thursday after having given up a gain of nearly 4% on Wednesday to close about 1% lower. That was the biggest reversal from well in the green to deep in the red for the software ETF in exactly one year, when stocks hit their 2025 lows the day before President Trump watered down his reciprocal tariff regime.
The drop comes a day after Anthropic launched Claude Managed Agents, designed to streamline, automate, and increase the use of its tools in workflows. The Claude maker, which seems to be going from strength to strength, recently talked up the power of its upcoming Mythos model, with OpenAI saying similar things about one of its own tools.
High-profile industry names punished on Thursday include Palantir Technologies, Atlassian, GitLab, ServiceNow, Workday, Adobe, and Salesforce.
While the software ETF is poised to close at a fresh 52-week low as of 11:17 a.m. ET, the VanEck Semiconductor ETF is on track to post a record closing high.
The divergence between the two industries within tech should come as no surprise. In fact, it’s never been more likely that if semis are outperforming the S&P 500, software is lagging (and vice versa):
The fundamentals behind the mechanics: the true enablers of software disruption (presumably Anthropic, and to a lesser extent OpenAI) may be privately held. Those are the firms that are lowering the barriers to entry to software and raising the prospect of lower supply, or a lower cost of production. But in order to do that, these AI tools need to be powered by a ton of chips (and memory, and networking equipment), making that hardware scarce. And there’s certainly a number of publicly traded companies available that investors have loved as beneficiaries of this demand for compute.
